PhyCor Inc., a physician management company, plans to invest about $80 million in Straub over the next five years, with about $50 million of that coming interest-free, said Dr. Blake Waterhouse, Straub's president.
The merger, authorized Tuesday night by Straub's board of directors and announced yesterday, still faces share
holder and regulatory approval. Officials are expecting the deal to close by the end of January.
The transaction will make publicly traded PhyCor a business partner of Straub's, providing capital, expertise and computer systems for the business side of the operation, Waterhouse said. Straub, which employs more than 2,000, is the largest Hawaii-based health care provider in the state.
Dr. William Montgomery, Straub's board chairman, said the board decided about two years ago to begin looking for a strategic partner to increase the value of Straub services.
The search wasn't out of financial necessity, Waterhouse said, noting the company has been profitable in recent years.
But Straub recognized that it could improve and expand its operations at a faster pace with a partner, and PhyCor fit the bill, he said.
"We believe we can do better more quickly with PhyCor," Waterhouse said.
Industry officials said Straub's merger reflects a national trend of hospitals collaborating with other hospitals or medical providers to try to boost efficiency without compromising care.
"This is indicative of what has been going on in the mainland," said David Hill, chief executive of Wahiawa General Hospital. The trend "is financially driven."
PhyCor will not have an ownership stake in the new Straub company that Straub physicians will form to oversee the medical side of the business - just as they do now, Waterhouse said.
He said the proposed deal will not affect patients or employees. The Straub name will remain unchanged.